x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
quarterly period ended September 30, 2008
|
|
or
|
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the transition period from _________________
to
_________________
|
84-1108035
|
||
(I.R.S.
employer
|
||
incorporation
or organization)
|
identification
no.)
|
Page
|
|||
PART
I. Financial Information:
|
1
|
||
Item
1.
|
Financial
Statements
|
1
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
|
2
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
5
|
|
|
|||
Item
4T.
|
Controls
and Procedures
|
6
|
|
PART
II. Other Information:
|
6
|
||
Item
1.
|
Legal
Proceedings
|
6
|
|
Item
1A.
|
Risk
Factors
|
6
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
6
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
6
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
6
|
|
Item
5.
|
Other
Information
|
6
|
|
Item
6.
|
Exhibits
|
6
|
|
Signatures
|
7
|
Consolidated
Balance Sheets
|
F-1
|
Consolidated
Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
|
F-2
|
Consolidated
Statements of Cash Flows (Unaudited)
|
F-3
|
Notes
to Consolidated Financial Statements (Unaudited)
|
F-5
|
September 30,
|
June 30,
|
||||||
|
2008
|
2008
|
|||||
ASSETS
|
(Unaudited)
|
|
|||||
Current
Assets
|
|||||||
Cash
and cash equivalents
|
$
|
947
|
$
|
1,964
|
|||
Accounts
receivable, net of allowance of $148 and $202
|
3,137
|
3,233
|
|||||
Inventories
|
348
|
615
|
|||||
Prepaid
expenses and other current assets
|
656
|
690
|
|||||
Total
Current Assets
|
5,088
|
6,502
|
|||||
Property
and Equipment, Net
|
639
|
592
|
|||||
Other
Assets
|
|||||||
Goodwill
|
11,111
|
11,878
|
|||||
Amortizable
intangible assets, net
|
4,246
|
4,584
|
|||||
Software
development costs, net
|
1,674
|
1,718
|
|||||
Investments
in available-for-sale securities
|
3,354
|
4,102
|
|||||
Other
long-term assets
|
360
|
426
|
|||||
Total
Assets
|
$
|
26,472
|
$
|
29,802
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Current
Liabilities
|
|||||||
Accounts
payable
|
$
|
1,655
|
$
|
2,372
|
|||
Accrued
expenses and other
|
2,341
|
3,508
|
|||||
Payroll
and other taxes
|
968
|
933
|
|||||
Current
portion of long-term debt
|
535
|
598
|
|||||
Current
portion of deferred revenue
|
435
|
607
|
|||||
Other
current liabilities
|
389
|
379
|
|||||
Total
Current Liabilities
|
6,323
|
8,397
|
|||||
Long-Term
Liabilities
|
|||||||
Deferred
revenue, net of current portion
|
512
|
545
|
|||||
Deferred
income taxes
|
880
|
880
|
|||||
Long-term
debt, net of current portion and debt discount
|
4,863
|
4,783
|
|||||
Other
|
332
|
142
|
|||||
Total
Liabilities
|
12,910
|
14,747
|
|||||
Commitments
and contingencies
|
|||||||
STOCKHOLDERS'
EQUITY
|
|||||||
Preferred
stock:
|
|||||||
Par
value $0.0001 per share; 10,000,000 shares authorized, none issued
and
outstanding
|
-
|
-
|
|||||
Common
stock:
|
|||||||
Par
value $0.0001 per share; 150,000,000 shares authorized, 92,733,220
shares
issued and outstanding
|
9
|
9
|
|||||
Additional
paid-in capital
|
32,031
|
31,732
|
|||||
Parent
company common stock
|
(2,154
|
)
|
(2,850
|
)
|
|||
Accumulated
other comprehensive income
|
(179
|
)
|
1,617
|
||||
Accumulated
deficit
|
(16,145
|
)
|
(15,453
|
)
|
|||
Total
Stockholders' Equity
|
13,562
|
15,055
|
|||||
Total
Liabilities and Stockholders' Equity
|
$
|
26,472
|
$
|
29,802
|
For the
three
months
ended
September
30,
2008
|
For the
three
months
ended
September
30, 2007
|
||||||
|
|||||||
Revenues
|
$
|
5,845
|
$
|
5,355
|
|||
Cost
of revenues
|
2,755
|
2,659
|
|||||
Gross
Profit
|
3,090
|
2,696
|
|||||
Operating
Expenses
|
|||||||
Research
and development
|
785
|
692
|
|||||
Sales
and marketing
|
599
|
528
|
|||||
General
and administrative
|
1,505
|
1,310
|
|||||
Depreciation
and amortization
|
268
|
355
|
|||||
Total
Operating Expenses
|
3,157
|
2,885
|
|||||
Operating
Loss
|
(67
|
)
|
(189
|
)
|
|||
Other
Income (Expense)
|
|||||||
Interest
expense
|
(372
|
)
|
(18
|
)
|
|||
Gain
on sale of investments
|
-
|
1,312
|
|||||
Other,
net
|
2
|
(3
|
)
|
||||
Total
other income (expense), net
|
(370
|
)
|
1,291
|
||||
Income
(loss) from continuing operations before provision for income
taxes
|
(437
|
)
|
1,102
|
||||
Provision
for income taxes
|
115
|
171
|
|||||
Income
(loss) from continuing operations
|
(552
|
)
|
931
|
||||
Income
from discontinued operations, net of tax
|
-
|
37
|
|||||
Net
income (loss)
|
(552
|
)
|
968
|
||||
Unrealized
loss on investments in available-for-sale securities
|
(748
|
)
|
-
|
||||
Foreign
currency translation gain (loss)
|
(1,048
|
)
|
380
|
||||
Total
comprehensive income (loss)
|
$
|
(2,348
|
)
|
$
|
1,348
|
||
Income
(loss) per share attributed to common stockholders – basic and
diluted
|
|||||||
Net
income (loss) from continuing operations
|
$
|
(0.01
|
)
|
$
|
0.01
|
||
Discontinued
operations
|
-
|
-
|
|||||
Net
income (loss)
|
$
|
(0.01
|
)
|
$
|
0.01
|
||
Weighted
average shares outstanding – basic and diluted
|
92,733,220
|
86,239,726
|
For the three
months
ended
September
30,
2008
|
For the three
months ended
September 30,
2007
|
||||||
|
|||||||
Cash
flows from operating activities :
|
|||||||
Net
income (loss)
|
$
|
(552
|
)
|
$
|
968
|
||
Adjustments
to reconcile net income (loss) to net cash used in operating
activities:
|
|||||||
Depreciation
and amortization
|
268
|
484
|
|||||
Debt
discount and debt issuance cost amortization
|
200
|
-
|
|||||
Loss
on disposition of property and equipment
|
-
|
12
|
|||||
Gain
on sale of investment in non-marketable securities
|
-
|
(1,312
|
)
|
||||
Changes
in assets and liabilities (net of the effect of acquisitions and
divestitures):
|
|||||||
Accounts
receivable
|
96
|
(394
|
)
|
||||
Inventories
|
267
|
(76
|
)
|
||||
Prepaid
expenses and other assets
|
34
|
53
|
|||||
Net
advances to parent company relating to operating
activities
|
-
|
(74
|
)
|
||||
Accounts
payable
|
(717
|
)
|
12
|
||||
Payroll
and other taxes payable
|
35
|
(151
|
)
|
||||
Deferred
revenue
|
(205
|
)
|
209
|
||||
Accrued
expenses and other liabilities
|
(828
|
)
|
(409
|
)
|
|||
Payment
of litigation costs
|
-
|
(2,000
|
)
|
||||
Net
cash used in operating activities
|
(1,402
|
)
|
(2,678
|
)
|
|||
Cash
flows from investing activities :
|
|||||||
Purchase
of property and equipment
|
(86
|
)
|
(93
|
)
|
|||
Proceeds
from the sale of investment in non-marketable securities
|
-
|
2,000
|
|||||
Capitalized
software development costs
|
(13
|
)
|
(181
|
)
|
|||
Net
cash provided by (used in) investing activities
|
(99
|
)
|
1,726
|
||||
Cash
Flows from financing activities :
|
|||||||
Proceeds
from sale of common stock, net of cash issuance costs
|
-
|
2,037
|
|||||
Proceeds
from sale of Parent company common stock, net of cash issuance
costs
|
841
|
-
|
|||||
Payments
on long-term debt
|
(102
|
)
|
(747
|
)
|
|||
Net
cash provided by (used in) financing activities
|
739
|
1,290
|
|||||
Effect
of exchange rate changes
|
(255
|
)
|
(153
|
)
|
|||
Net
increase (decrease) in cash and cash equivalents
|
(1,017
|
)
|
185
|
||||
Cash
and cash equivalents at beginning of period
|
1,964
|
665
|
|||||
Cash
and cash equivalents at end of period
|
$
|
947
|
$
|
850
|
|||
Continued
/……………..
|
For the three
months ended
September 30,
2008
|
For the three
months ended
September 30,
2007
|
||||||
|
|||||||
Supplemental
disclosures of cash flow information
|
|||||||
Cash
paid during the period for :
|
|||||||
Interest
|
$
|
193
|
$
|
33
|
|||
Income
taxes
|
$
|
95
|
$
|
383
|
|||
Non-cash
investing and financing transactions during the year for :
|
|||||||
Shares
issued for accrued litigation costs
|
$
|
-
|
$
|
825
|
|||
Value
of warrants issued for amended debt covenants
|
$
|
15
|
$
|
-
|
|||
Gain
on sale of Parent company common stock
|
$
|
337
|
$
|
-
|
|||
Shares
of Parent company common stock remitted in exchange for Parent company
obligations
|
$
|
193
|
|||||
Parent
company obligations assumed by Company
|
(140
|
)
|
$
|
-
|
|||
Loss
on settlement of Parent company obligations
|
$
|
53
|
$
|
-
|
Balance,
July 1, 2008
|
$
|
11,878,000
|
||
Effect
of exchange rate changes
|
(767,000
|
) | ||
Balance,
September 30, 2008
|
$
|
11,111,000
|
|
1)
|
When
customer acceptance can be estimated, expenditures are capitalized
as work
in process and deferred until completion of the contract at which
time the
costs and revenues are recognized.
|
|
2)
|
When
customer acceptance cannot be estimated based on historical evidence,
costs are expensed as incurred and revenue is recognized at the completion
of the contract when customer acceptance is
obtained.
|
|
2008
|
2007
|
|||||
Numerator
for basic and diluted income (loss) per share:
|
|||||||
Net
income (loss)
|
$
|
(552,000
|
)
|
$
|
968,000
|
||
Deemed
distribution to parent company
|
(140,000
|
)
|
-
|
||||
Net
income (loss) available to common shareholders
|
$
|
(692,000
|
)
|
$
|
968,000
|
||
Denominator
for basic and diluted income (loss) per common share:
|
|||||||
Weighted
average number of shares of common stock outstanding
|
92,733,220
|
86,239,726
|
|||||
|
|||||||
$
|
(0.01
|
)
|
$
|
0.01
|
|
September
30,
2008
|
June 30,
2008
|
|||||
ComVest
term loan, net of debt discount of $637,000 and $756,000
|
$
|
4,363,000
|
$
|
4,244,000
|
|||
ComVest
revolver
|
500,000
|
500,000
|
|||||
McKenna
note
|
395,000
|
497,000
|
|||||
Homann
note
|
125,000
|
125,000
|
|||||
Other
notes
|
15,000
|
15,000
|
|||||
|
5,398,000
|
5,381,000
|
|||||
Less
current portion
|
(535,000
|
)
|
(598,000
|
)
|
|||
Long
term portion
|
$
|
4,863,000
|
$
|
4,783,000
|
(1)
|
On
August 1, 2007 the Company and Mr. McKenna entered into an agreement
resolving all outstanding actions by Mr. McKenna against the Company
and
its subsidiaries related to the initial action against CarParts
Technologies, Inc., which is now known as ASNA. The agreement provided
that the Company would pay Mr. McKenna $2,000,000 in cash, $825,000
on a
promissory note with an interest rate of 8% amortized in equal payments
over a 24-month period (see Note 6) and in addition would issue Mr.
McKenna 1,718,750 shares of Common Stock of the Company, which represented
an aggregate number of shares of common stock of the Company that
the
parties determined fairly represented $825,000 (assuming a price
of $0.48
per share of common stock, the closing price of the Company’s common stock
on the date of settlement). Mr. McKenna was also entitled to warrants
to
purchase an equivalent number of shares of common stock at the same
price,
which was valued at $412,000 (using the Black-Scholes valuation model)
and
recorded as an additional litigation cost for the year ended June
30,
2007. Upon entering this agreement all parties agreed to withdraw
all
existing litigation and claims. The Company recorded the settlement
with
McKenna as of June 30, 2007. The shares were issued in fiscal 2008
(see
Note 8). This settlement was amended during fiscal 2008 (see Note
8).
|
(2)
|
Homann
Tire LTD (“Homann”) filed a complaint against the Company’s subsidiary
ASNA (f/k/a CarParts Technologies, Inc.) in California District Court
on
August 11, 2005 regarding the Company’s obligations pursuant to a software
license agreement that it entered into with Homann on October 18,
2002.
|
Issuance
of warrants in connection with the ComVest Loan Agreement (see Note
6):
|
||||
ComVest
|
5,083,333
|
|||
Other
|
250,000
|
|||
|
5,333,333
|
|||
Issuance
of warrants to a service provider (valued at $27,000)
|
155,549
|
|||
Issuance of
warrants in McKenna settlement (see Note 7 and above)
|
3,437,500
|
|||
Issuance of
warrants to investors in private placement (see above)
|
5,208,337
|
|||
Issuance
of warrants to placement agent in private placement
|
260,417
|
|||
Issuance
of warrants to Lewis Global Funds (see Note 3)
|
6,402,999
|
|||
Issuance
of warrants to placement agent (see above )
|
1,000,000
|
|||
Total
issued
|
21,798,135
|
Cash
|
$
|
157
|
||
Accounts
receivable
|
439
|
|||
Inventories
|
6
|
|||
Other
|
27
|
|||
Current
Assets
|
629
|
|||
Property
and equipment
|
156
|
|||
Other
long term assets
|
219
|
|||
Goodwill
|
723
|
|||
Amortizable
intangible assets, net
|
2,242
|
|||
Total
Assets
|
3,969
|
|||
Liabilities
assumed
|
(1,739
|
)
|
||
Net
assets divested
|
2,230
|
|||
Proceeds
|
0
|
|||
Loss
on disposal
|
$
|
(2,230
|
)
|
Accounts
receivable
|
$
|
1,050
|
||
Investments
in available-for-sale securities
|
369
|
|||
Current
Assets
|
1,419
|
|||
Goodwill
|
1,640
|
|||
Total
Assets
|
3,059
|
|||
Liabilities
assumed
|
(1,405
|
)
|
||
Net
assets divested
|
1,654
|
|||
Proceeds
- value of shares and receivable (see Note 3)
|
4,041
|
|||
Gain
on disposal
|
$
|
2,387
|
|
For
the
Three
months
Ended
September
30,
2007
|
|||
Revenue
|
$
|
1,260
|
||
Cost
of sales and operating expenses
|
1,148
|
|||
Income
from operations
|
112
|
|||
Other
expense
|
(14
|
)
|
||
Income
taxes
|
61
|
|||
Net
income, net of taxes
|
$
|
37
|
For the Three Months
Ended September 30,
|
|||||||||||||
2008
|
2007
|
$ Variance
|
% Variance
|
||||||||||
Research
and development
|
$
|
785,000
|
$
|
692,000
|
$
|
93,000
|
13.4
|
%
|
|||||
Sales
and marketing
|
599,000
|
528,000
|
71,000
|
13.5
|
%
|
||||||||
General
and administrative
|
1,505,000
|
1,310,000
|
195,000
|
14.9
|
%
|
||||||||
Depreciation
and amortization
|
268,000
|
355,000
|
(87,000
|
)
|
-24.5
|
%
|
|||||||
Total
Operating Expenses
|
$
|
3,157,000
|
$
|
2,885,000
|
$
|
272,000
|
9.4
|
%
|
Exhibit
Number
|
|
Description
|
31.1
|
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
31.2
|
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32.1
|
|
Certification
of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350,
as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.2
|
|
Certification
of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350,
as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
Aftersoft
Group, Inc.
|
||
Date
November 12, 2008
|
By:
|
/s/
Ian Warwick
|
Ian
Warwick
|
||
Chief
Executive Officer
(Principal
Executive Officer)
|
||
Date
: November 12, 2008
|
By:
|
/s/
Charles F. Trapp
|
Charles
F. Trapp
|
||
Chief
Financial Officer
(Principal
Financial Officer)
|
Exhibit
Number
|
|
Description
|
31.1
|
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
31.2
|
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32.1
|
|
Certification
of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350,
as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.2
|
|
Certification
of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350,
as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
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